ISLAMABAD: The National Tax Council (NTC) has decided to propose amendments to the Agriculture Income Tax (AIT) legislation in provincial assemblies after failing to reach a consensus on harmonizing Goods and Services Tax (GST) rates and unifying property taxes under a single framework.
Key Developments:
- Draft GST Negative List: The NTC aims to present a draft of the negative list for GST on services by January 1, 2025. Transitioning from a positive to a negative list is planned for implementation by July 1, 2025, to combat tax evasion and streamline tax collection.
- Unified GST Returns: While the Federal Board of Revenue (FBR) successfully introduced unified GST returns for Cellular Mobile Operators (CMOs), broader implementation across the telecom sector remains challenging due to unresolved input adjustment issues.
- Agriculture Income Tax Legislation:
- The Ministry of Finance noted that the International Monetary Fund (IMF) had not raised concerns about Punjab’s AIT framework, which lacks a specified rate in its amended law.
- Sindh’s Revenue Board has prepared its draft AIT amendment bill, awaiting a political decision for submission to the provincial assembly.
- Khyber Pakhtunkhwa and Balochistan have pledged to present their amendments by the January 1, 2025, deadline.
Property Tax and Broader Tax Reforms:
The NTC’s scope will be expanded to include property taxation, with necessary legislative and administrative changes planned. A unified approach aims to enhance revenues through better compliance and tax reforms across agriculture, GST on services, and property taxation.
Federal and Provincial Tensions:
Disagreements persist between the FBR and provincial authorities over finalizing the negative list for GST on services. The FBR fears potential encroachment by provinces on federal jurisdiction under the proposed framework.
Official Meeting Highlights:
A meeting chaired by Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb brought together federal and provincial stakeholders to discuss tax reforms. Held in the context of the recently signed National Fiscal Pact, the meeting underscored the need to maximize tax revenue from under-taxed sectors, particularly real estate, property, and agriculture.
Statements and Commitments:
- KP Finance Minister Muzzammil Aslam expressed disappointment over the irregularity of NTC meetings, noting this was the first session in 18 months despite commitments to quarterly gatherings.
- The meeting emphasized aligning AIT regimes with federal frameworks by January 2025, with tax collection starting mid-2025 for FY2024-25 agricultural income.
Next Steps:
- Harmonization of GST rates for goods and services remains under discussion, with the NTC’s executive committee tasked with finalizing modalities.
- Legal and policy changes to implement property taxation reforms and close the GST compliance gap will follow.
- Additional efforts will focus on enhancing provincial revenue collection and improving corporate and agricultural tax systems.
The NTC’s initiatives align with broader fiscal reforms under the National Fiscal Pact, emphasizing equitable taxation and addressing inefficiencies across federal and provincial domains.
